This invention relates to computer-aided trading of financial instruments, and preferably to trading of securities over the Internet.
In the United States, the trading of securities is closely regulated under the Securities Exchange Act of 1934, 15 U.S.C. xc2xa7xc2xa778a-78mm. The term xe2x80x9csecurityxe2x80x9d is defined in 15 U.S.C. xc2xa778c(a)(10) as xe2x80x9cany note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof), or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency, or in general, any instrument commonly known as a xe2x80x98securityxe2x80x99; or any certificate of interest or participation in, temporary or interim certificate for, or warrant or right to subscribe to or purchase, any of the foregoing . . . but shall not include currency or any note draft, bill of exchange, or banker""s acceptance which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof the maturity of which is likewise limited.xe2x80x9d Stocks are specific instances of securities. Although the preferred embodiment is primarily concerned with computerized stock trading, it is fully applicable to trading of any securities.
Securities are conventionally traded on exchanges. As set forth in 15 U.S.C. xc2xa778c(a)(1), xe2x80x9cthe term xe2x80x98exchangexe2x80x99 means any organization, association, or group of persons, whether incorporated or unincorporated, which constitutes, maintains, or provides a market place or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange as that term is generally understood, and includes the market place and the market facilities maintained by such exchangexe2x80x9d. Well known exchanges include, for example, the New York Stock Exchange, the American Stock Exchange and NASDAQ. Such known exchanges are referred to herein as national exchanges.
Usually securities are traded through brokers and dealers, which frequently use an on-line system to receive orders and facilitate trades. As set forth in 17 C.F.R. xc2xa7240.17a-23(b)(2) a broker/dealer trading system is xe2x80x9cany facility that provides a mechanism, automated in full or in part, for:
(i) Collecting, receiving, disseminating, or displaying system orders [i.e., orders to purchase or sell a security]; and
(ii) Matching, crossing, or executing system orders, or otherwise facilitating agreement to the basic terms of a purchase or sale of a security between system participants [i.e., the users of the trading system], or between a system participant and the system sponsor, through use of the system or through the system sponsor [i.e., the entity controlling the broker/dealer system].xe2x80x9d
In this patent application, the terms xe2x80x9csecurityxe2x80x9d , xe2x80x9cexchangexe2x80x9d and xe2x80x9cbroker/dealer trading systemxe2x80x9d , are used as defined above.
Systems are known for trading securities over the Internet on the national exchanges at the prices quoted on those exchanges. These systems support trading during normal business hours of the national exchanges, which may not be convenient for many users, such as many individuals who would prefer to trade from home after the close of the exchanges. The existing systems, however, do not support active trading after the closing hours of the exchanges. Thus, there is a need for a system that permits the users to execute trades after normal market hours (after-hours trades) without using an established exchange. And, there is a need for a system that permits users to trade with each other (xe2x80x9cuser-to-user tradingxe2x80x9d) without involving an exchange.
The presently available systems are directed toward the presentation of numerically formatted information. Moreover, these systems do not provide a visualization of the status of securities as they are traded so as to enable users to gain an essentially immediate and accurate impression of a stock""s status, direction of movement, and rate of change, without having to resort to complex mental calculations and holding such calculations in short-term memory. But humans are unsuited to processing numeric information quickly and accurately, and performing mental calculations under stressful conditions places very high cognitive workloads on humans. In addition to being poor processors of numeric information, humans also tend to have very weak short-term memories. Requiring users to perform mental calculations and then hold the results of those calculations in short-term memory while performing even more calculations is unnecessarily difficult and demanding, especially when users are placed under the additional stress of having to decide whether to buy, sell or hold a stock. Traditional on-line trading systems further compound the problem by requiring users to navigate from page to page within the site to gather news and information on their positions, their profit and loss, their open orders, their current positions, and their financial account information. Each time a user moves to a new screen he is forced to store values, which are critical to informed trade-decision-making, in short-term memory.
Another deficiency in current Internet trading systems is that users cannot obtain a real-time quotation on a particular stock (or a portfolio of stocks) without manually requesting a specific quotation from the trading system server, often by typing it every time they need a quote, or hitting xe2x80x9crefresh.xe2x80x9d That is, users of current Internet trading systems cannot simply access the trading system and receive a continuously updated display of real-time quotes for a particular stock or a portfolio of stocks. The need to type in a stock symbol every time a quote is desired further contributes to the inefficiency of the existing systems.
Accordingly, there is a need for an efficient Internet-based trading system which provides improved human interaction and after-hours trading.
The system and method of the preferred embodiment supports trading of securities over the Internet both on national exchanges and outside the national exchanges. The preferred embodiment also supports an improved human interface and a continuous display of real-time stock quotes on the user""s computer screen.
In the preferred embodiment, the users are subscribers to a securities trading service offered over the Internet. Each subscriber to this service is simultaneously connected from his own computer to a first system which provides user-to-user trading capabilities and to a second system which is a broker/dealer system of his/her choices. By user-to-user trading we mean a trade that is made between two users of the system. The system providing the user-to-user trading services includes a hierarchical network of replicated servers supporting replicated databases. The broker/dealer system is a server-based system such as any one of the systems currently used by broker/dealers to maintain their clients"" accounts. The use of these broker/dealer systems in the present invention is conventional except for their interaction with the user-to-user trading system. In particular, each broker/dealer server communicates with the user""s computer as well as with the root server of the user-to-user system when the user""s account is affected, and the user-to-user system provides real-time continuously updated stock information and facilitates user-to-user trades that have been approved by the broker/dealer systems with which it interacts.
Users of the preferred system can trade securities with other users of the system after national market trading hours. As part of this user-to-user trading, a user can accept a buy or sell offer at the terms offered or he can initiate a counteroffer and negotiate a trade. This ability to have users trade and negotiate trades among themselves creates a market within the subject system, referred to herein as xe2x80x9cafter-hours marketxe2x80x9d or xe2x80x9cNite Market,xe2x80x9d but which is capable being operated 24 hours per day, 7 days per week.
The preferred embodiment provides an ergonomic graphical user interface (GUI) that includes at least some of the following functional benefits in comparison with existing on-line consumer trading systems: (1) faster access to critical information; (2) faster execution of primary trading functions; (3) better decision making during the trading process; (4) fewer undetected critical errors; (5) easier correction of detected errors; (6) faster and more reliable problem resolution; (7) improved use of each user/trader""s desktop workspace; (8) easier customization and configuration based on user experience; (9) easier and faster initial setup of each user""s securities on the system; and (10) faster and more stable acquisition of trading skills. The GUI of the preferred embodiment graphically displays a xe2x80x9cvisual quotexe2x80x9d that shows at a glance the condition of the market in a security and the user""s relative position based on the status of the security in the marketplace. This visual quote provides a graphic representation of the important variables that the user needs to make accurate trading decisions without interpreting traditional numeric quotes. Further, the GUI of the preferred embodiment, unlike other on-line trading interfaces, does not require users to page to a separate screen to view their current and open positions in a security, thereby reducing errors and short-term memory demands on the user and improving the quality of on-line trading. The preferred embodiment also provides speed-trading functions as well as visual feedback that tracks the progress of the security trading process.
Although the preferred embodiment described below relates to computerized stock trading, it is readily applicable to trading of any securities and, in addition, a person skilled in the art will readily appreciate how the disclosed technology can be used for other forms of computerized trading (e.g., trading airline tickets, automobiles, or theater tickets).